Modern Liability Management Has Resulted in

question 63

Multiple Choice

Modern liability management has resulted in

• A)increased sales of negotiable CDs to raise funds.
• B)increase importance of deposits as a source of funds.
• C)reduced borrowing by banks in the overnight loan market.
• D)failure by banks to coordinate management of assets and liabilities.

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Definitions:

Equity Instrument

Any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Derivative Instrument

A financial contract whose value is derived from the value of an underlying asset, index, or rate.

Liabilities

Financial obligations of a business, including money owed to creditors or suppliers.

Financial Instrument

Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.